Asia propylene supply to lengthen on downstream woes

SINGAPORE (ICIS)–Propylene supply in Asia could lengthen in the near term with downstream producers looking at further lowering plant operating rates.

• China import demand hinges on domestic market behavior
• SE Asia to intensify exports to NE Asia
• Selling pressure strong among offtakers

Amid poor sentiment, spot propylene prices have fallen to a near five-year low of $557.5/tonne CFR (cost and freight) NE (northeast) Asia in the week ending 3 April, ICIS data showed.

In Japan, recent production cuts announced by downstream automobile manufacturers raised concerns among propylene producers, prompting them to cut production to keep inventory as low as possible.

For integrated producers, that meant more propylene in theory unless they decide to cut operating rates.

In South Korea, where domestic propylene demand is significant, downstream producers are beginning to feel the impact of poor consumption in the export markets as various countries have shut their borders or imposed restrictions amid the coronavirus pandemic.

In China, domestic propylene producers were trying to increase run rates on recent declines in feedstock costs. Its appetite for imports will depend on pricing of domestically available cargoes. Based on current prices, imported cargoes are cheaper.

In southeast Asia, demand was virtually non-existent as most countries in the region are under partial lockdowns. This has forced propylene producers in the region to look to China for a home for their lots.

Countries in full lockdown mode to stem the tide of coronavirus infections such as Malaysia and India are expected to re-open in mid-April based on existing schedule.

Demand could pick up when these markets re-open but there are no guarantees at the moment and offtakers are committed to bring lots into northeast Asia in the near term.

Deep-sea cargoes from south America, as well as India, are available due to poor downstream demand and may head to Asia.

Focus article by Joson Ng

Additional reporting by Doris He

Photo: A container ship is docked at a port during a sunset in Osaka, western Japan.  (By Andy Wong/AP/Shutterstock)

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